June 20 marks the start of Summer Restaurant Week here in New York. Actually, it’s two weeks, but that’s beside the point. An article in The New York Times Dining Out section on Wednesday For 20 Bucks, Is It Worth It? took readers behind the scenes of this tradition that began with the 1992 Democratic National Convention.
Restaurant Week was originally created to attract new customers to top restaurants during the slow summer season. Participants offer prix fixe lunches (and sometimes dinners) for an outrageously low price (by New York standards), usually coinciding with the current year. This year, however, instead of $20.05 for a three-course lunch, not including drinks, tax or tip, the price is $20.12 in honor of New York’s bid for the 2012 Summer Olympics.
To be part of the official promotion, which includes a listing on the Restaurant Week website and all related marketing materials, restaurants must first be invited by NYC & Company, the city’s official tourism marketing arm, and then pay $2500. Selection is based on their ratings in the Zagat Restaurant survey, as well as overall popularity.
The machinations that the 201 participating restaurants go through to make this promotion economically worthwhile provide some interesting insights into how players compete in price-constrained environments. Granted, these guys have to hold their prices down for only two weeks, but there are important lessons that every company in competitive pricing situations should consider in order to maintain profitability.
Here’s a summary of some of their coping strategies. Which ones might you be able to adapt when pricing competitive proposals for your business?
- Limit the choices. Restaurants are supposed to offer at least three choices for each course, but many, like Café Boulud, get away with two. And with the regular, higher priced menu still available in addition to the special Restaurant Week menu, it’s more difficult for diners “to ignore the more imaginative a la carte dishes flirting from the sideline.”
- Offer extras. To increase the average transaction size, Tocqueville devised a $15 three-glass wine flight paired to each course.
- Use less expensive ingredients. Chanterelle offers chicken or salmon Restaurant Week specials rather than more exotic organ meats.
- Use smaller amounts of costly ingredients. Eleven Madison Park admits to putting fewer morels in their English pea flan.
- Sub-size it. CraftBar offers the same dishes as their regular menu, but in slightly smaller portions.
- Don’t include the signature product. Everyone wants the guacamole at Dos Caminos, but to get it they’ll have to order a la carte since it’s not part of the Restaurant Week menu.
- Opt out. 10% of restaurants invited decline to participate. Le Bernardin is one of them. “'Twenty dollars doesn’t cover what it costs us for one dish to produce,'” sniffs chef Eric Ripert. The Harrison isn’t participating this year because rather than bring in new customers, Restaurant Week cannibalized existing business, with regulars enjoying the temporarily lower prices.
Sometimes you just have to say no and walk away from the business to stay profitable. If you can’t whittle your costs or build up value on the revenue side, your best alternative may be to take yourself out of that game and play another one.
